Business Directories

US 'pressuring BAE in bribery probe'

Washington, May 22, 2008

The United States is pressuring BAE Systems, Britain's top arms maker, to cooperate in a high-stakes corruption probe of arms sales to Saudi Arabia, a former top US Justice Department official said.

'DoJ (the Department of Justice) is sending the loudest possible message that it can to the company,' said Joshua Hochberg, a former fraud section chief who supervised investigations and prosecutions of overseas bribery charges until leaving in 2005.

The US investigation took a dramatic turn over the weekend when BAE disclosed that Mike Turner, BAE's chief executive, and Sir Nigel Rudd, a non-executive director, were served with subpoenas on their arrival in the United States last week.

'The fact that subpoenas were issued by surprise clearly reflects the government's dissatisfaction with the extent of BAE's cooperation,' said Hochberg, now a partner at McKenna Long & Aldridge in Washington.

For years, BAE has denied allegations it made illegal payments in the mid-1980s to Saudi potentates to clinch a deal worth up to $80 billion for its Tornado fighter jets and other military hardware.

In June 2007, BAE said it had been notified that DoJ had begun investigating its compliance with anti-bribery laws, including dealings with Saudi Arabia.

If convicted under the 1977 Foreign Corrupt Practices Act, a company could face everything from criminal fines to a ban on doing business with the US government, Hochberg said.

The law has great reach. It bars US companies, as well as foreign companies doing business in the United States, from bribing foreign officials to grease the skids for business.

Britain's Serious Fraud Office dropped its own inquiry into the matter in December 2006 amid reported Saudi threats to shelve plans to buy another 72 BAE Eurofighter jets and crimp anti-terrorism cooperation.

Then-Prime Minister Tony Blair said at the time the British probe threatened national security.

Normally, companies facing a DoJ investigation cooperate in the hope of being cleared or getting lenient treatment. BAE, however, may be constrained by, among other things, the British decision to quash its probe on national security grounds, said Richard Aboulafia of TEAL Group, an aerospace consultancy.

US officials examined and then returned electronic equipment carried by Turner, who arrived in Houston, Texas, and Sir Nigel, who arrived in Newark, New Jersey, said Greg Caires, a spokesman for BAE Services Inc, the company's North American arm.

Caires and Lindsay Walls, a spokeswoman for the Farnborough, England-based parent company, said BAE had erred in earlier statements that both men had been served with court papers in Houston.

Walls declined to comment on the scope of BAE cooperation. Instead, she repeated a Sunday statement: 'The company has been and continues to be in discussion with the DoJ concerning the subpoenas served in the course of its investigation.' - Reuters